Summary: Real estate investment trusts (REITs) have gained immense popularity among investors seeking steady income and growth. Among the various types of REITs, net lease REITs have emerged as a particularly attractive option. Therefore, in this guide, we share the top 5 net lease REITs worth investing in this year. The most convenient way to invest in this asset class is through a reputable brokerage platform like eToro.
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What are net lease REITs?
Net lease REITs (real estate investment trusts) operate in a unique niche within the real estate market. These REITs primarily invest in properties where the tenants are responsible for covering not only the base rent but also additional property-related expenses, such as property taxes, insurance, and maintenance costs. This structure allows net lease REITs to generate consistent and predictable income streams, making them appealing to income-focused investors.
Top 5 net lease REITs to invest in 2024
After thorough research, we’ve come up with a list of the top 5 net lease REITs that you should consider investing in this year. They include:
- W. P. Carey (NYSE: WPC);
- Realty Income (NYSE: O);
- Broadstone Net Lease (NYSE: BNL);
- Agree Realty (NYSE: ADC);
- EPR Properties (NYSE: EPR).
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W. P. Carey (WPC)
W. P. Carey stands out as a leading net lease REIT with a diversified portfolio that spans industrial, office, retail, and warehouse properties. The company has a track record of long-term tenant relationships and prides itself on its global presence. Also, W. P. Carey’s commitment to a conservative investment approach and a history of dividend growth make it a compelling choice for investors seeking stability and income.
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Realty Income (O)
Realty Income has a unique appeal with its monthly dividend distribution. Specializing in retail and commercial properties, Realty Income has a track record of consistent dividends and is recognized for its reliability and income generation. Its commitment to providing monthly dividends makes it an excellent choice for investors seeking a regular income stream.
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Broadstone Net Lease (BNL)
Broadstone Net Lease has gained recognition for its exclusive focus on providing long-term net lease solutions. The company primarily invests in properties occupied by investment-grade tenants, enhancing the stability of its cash flow. Furthermore, BNL’s emphasis on quality tenant relationships and a geographically diversified portfolio make it an appealing choice for investors seeking reliability and income growth.
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Agree Realty (ADC)
Agree Realty specializes in retail and mixed-use properties, with a focus on establishing strategic partnerships with its tenants. The company places importance on a disciplined acquisition strategy, targeting properties with strong growth potential. In addition to that, ADC’s commitment to sustainable and growing dividends, coupled with its focus on tenant relationships, positions it as an attractive net lease REIT for investors.
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EPR Properties (EPR)
EPR Properties differentiates itself by concentrating on experiential real estate, including entertainment, recreation, and education properties. With a unique portfolio that includes theaters, ski resorts, and educational facilities, EPR provides investors with exposure to diverse sectors. The company’s focus on experiential assets and commitment to dividends also make it an intriguing option for those looking to diversify their net lease REIT investments.
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How to invest in net lease REITs: Step-by-step
Investing in net lease REITs is a straightforward process that can be accomplished through a few key steps, including:
Step 1: Choose the right broker
Selecting the right brokerage platform is the initial and crucial step in your net lease REIT investment journey. Look for a reputable broker that aligns with your investment goals, offers a user-friendly interface, and provides access to a diverse range of REITs.
That said, our go-to broker for investing in net lease REITs is eToro, a widely popular platform with over 30 million registered accounts. Besides its popularity, it offers a host of solid investing features, such as:
- Commission-free stock trading;
- Access to over 2,000 stocks from 17 different exchanges;
- The option to purchase fractional shares;
- Charting tools;
- A user-friendly platform that simplifies the trading experience.
Highly Rated Stock Trading & Investing Platform
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Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.
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0% commission on buying stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.
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Copy top-performing traders in real time, automatically.
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eToro USA is registered with FINRA for securities trading.
For more investment opportunities within this asset class, feel free to explore these guides:
- Office REITs;
- High Dividend REITs;
- Data Center REITs;
- Apartment REITs;
- Farmland REITs;
- Industrial REITs;
- Self Storage REITs;
- Hotel REITs;
- Mortgage REITs;
- Timber REITs;
- Cell Tower REITs;
Step 2: Fund your account
Once you’ve chosen a broker, you’ll need to fund your investment account. Most brokers allow funding through various methods, including bank transfers or credit/debit cards. Nevertheless, ensure that your account has sufficient funds to cover your desired investment amount and any associated fees.
Step 3: Place your order
With your account funded, the next step will be to place your order. So, navigate to the trading platform on your chosen broker’s website or app. Locate the section for buying or trading securities and enter the details for the net lease REIT you wish to purchase. This includes the REIT’s ticker symbol, the number of shares you want to buy, and the order type (e.g., market order or limit order).
Pros and cons of investing in net lease REITs
Pros
- Stable income: Net lease REITs offer a steady income stream through long-term leases with tenants responsible for additional property expenses;
- Diversification: Investing in a variety of properties and tenants allows for portfolio diversification, reducing risk;
- Inflation hedge: Rental agreements often include clauses that account for inflation, providing a potential hedge against rising prices;
- Potential for capital appreciation: Some net lease REITs may experience property value appreciation over time, contributing to potential capital gains;
- Passive investment: REITs allow investors to benefit from real estate ownership without the responsibilities of property management.
Cons
- Interest rate sensitivity: Net lease REITs may be sensitive to changes in interest rates, which can impact their borrowing costs and, consequently, their profitability;
- Market risk: Economic downturns can affect tenant businesses, potentially leading to lease defaults and impacting REIT performance;
- Property-specific risks: The value of individual properties may fluctuate based on factors such as location, tenant quality, and market conditions;
- Lack of control: Investors have limited control over the management and decision-making processes of the underlying properties;
- Tax implications: REIT dividends are taxed as ordinary income, potentially resulting in a higher tax burden compared to capital gains.
Common mistakes to avoid when investing in REITs
To maximize the benefits of net lease REIT investments and mitigate risks, avoid these common mistakes:
- Neglecting research: In-depth research is crucial. Skipping due diligence on REITs’ financials, tenant quality, and market conditions can lead to poor investment decisions;
- Ignoring diversification: Concentrating your investments in a single net lease REIT exposes your portfolio to unnecessary risks. Diversify wisely to protect against underperformance in specific sectors or regions;
- Overlooking economic indicators: Economic factors significantly impact the real estate market. Failing to stay informed about economic indicators can result in missed opportunities or increased exposure to market downturns;
- Underestimating interest rate risks: Interest rate fluctuations can affect the profitability of net lease REITs. Stay vigilant and consider the potential impact of interest rate changes on your investment;
- Chasing yield without consideration: High yields can be tempting, but they may come with higher risk. Avoid chasing yields without thoroughly understanding the underlying factors driving them.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
FAQs about net lease REITs
Are net lease REITs a safe investment?
Net lease REITs can provide a stable income stream, but like any investment, they carry risks. Therefore, it’s essential to conduct thorough research, consider your risk tolerance, and diversify your portfolio.
How do I buy shares of net lease REITs?
You can purchase shares of net lease REITs through brokerage accounts like eToro. Choose a reputable brokerage platform, research available REITs, and execute trades based on your investment preferences.
What is the typical dividend yield for net lease REITs?
Dividend yields vary among net lease REITs. Generally, they offer competitive yields compared to other income-focused investments. Research individual REITs to understand their specific dividend history and current yields.
How often do net lease REITs pay dividends?
Net lease REITs typically pay dividends on a regular schedule, often quarterly. The specific payout frequency depends on the REIT’s distribution policy.
Can I lose money investing in net lease REITs?
Yes, like any investment, there is a risk of losing money with net lease REITs. Factors such as economic downturns, lease defaults, or market fluctuations can impact the value of your investment. Diversification and thorough research can help mitigate these risks.
